Question

Step 1: Understand the Problem

Keep the Old Car or Buy a Used Car
Manny is an online student who currently owns an older car that is fully paid for. He drives, on average, 190 miles per week to commute to work. With gas prices currently at $
2.9 per gallon, he is considering buying a more fuel-efficient car, and wants to know if it would be a good financial decision.



The old car Manny owns currently gets 18 miles per gallon for average fuel efficiency. It has been a great vehicle, but with its age, it needs repairs and maintenance that average $
770 per year (as long as nothing serious goes wrong).



The newer, more fuel-efficient car that he is looking at to purchase will cost a total of $
6,500 over a three-year loan process. This car gets 32 miles per gallon and would only require an average of $
10 per month for general maintenance. To help make a decision, Manny wants to calculate the total cost for each scenario over three years. He decides to use the quantitative reasoning process to do this.


Step 3: Apply Quantitative Tools
Use computational and algebraic tools to quantify the total costs (gas, maintenance/repairs, purchase price) for each scenario over the three years.

Round your answers to the nearest dollar.

Scenario

Total Cost for Three Years

Keep the old car

$
Number


Buy the fuel-efficient used car

$
Number

Answer 1

To calculate the total cost for each scenario over three years, we can use the following formulas:

Total cost of keeping the old car = (Gas cost + Maintenance cost) x 3 years

Total cost of buying the used car = (Purchase price + Gas cost + Maintenance cost) + (Interest on loan)

Using the given information, we can calculate the total cost for each scenario:

Total cost of keeping the old car = ($2.9/gallon x 190 miles/18 miles per gallon + $770) x 3 = $10,768

Total cost of buying the used car = ($6,500 + $2.9/gallon x 190 miles/32 miles per gallon + $10 per month) + (Interest on loan) = $9,425 + (Interest on loan)

Based on the given information, buying the used car would be the better financial decision as it would cost less over three years. However, without knowing the interest rate on the loan, we cannot accurately calculate the total cost of buying the used car.